ITEM:		CONSENT CALENDAR
4.	CONSIDER Authorization of Budgeted CONTINGENCY ADJUSTMENT FOR Drilling of Full-Scale Aquifer Storage and Recovery (ASR) Well as part of MPWMD Phase 1 ASR Project
Meeting Date:			February 22, 2007	Budgeted:	Yes
From:			David A. Berger,	Program/	Water Supply
			General Manager	Line Item No.:	1-2-1 A. 1
Prepared By:			Joe Oliver	Cost Estimate:	$,1058,935
General Counsel Approval: Approved as to form.
Committee Recommendation: The Administrative Committee considered this item on February 12, 2007 and recommended approval.
CEQA Compliance: N/A

SUMMARY: On November 20, 2006, the Board authorized a contract agreement with Zim Industries, Inc. to complete construction of a second full-scale Aquifer Storage and Recovery (ASR) well as part of the Monterey Peninsula Water Management District’s (District’s) Phase 1 ASR Project. Drilling operations began in December 2006 and the new well is currently undergoing well development. The contract not-to-exceed amount was $1,058,935, which included a 5% ($50,425) budget contingency for unforeseen circumstances that may be encountered during construction. The assigned contingency was less than the more normal 10% based on the proximity of the new well to the existing Santa Margarita Test Injection Well No. 1 (SMTIW No. 1), and the assumption that conditions to be encountered would be more certain and less likely to require contingency funds above the bid cost estimate. However, as drilling and well completion have progressed, several conditions have been encountered that have or will result in the need for additional contingency funds to be available for this project. These include: (a) deeper than anticipated total drilling depth to the base of the target aquifer, the Santa Margarita Sandstone, (b) deeper than anticipated total casing depth for both the new ASR well and the associated monitor well, and (c) additional well development work than anticipated in the original bid document. Given that substantial work still remains to be accomplished under the contract (i.e., finish well development, install test production equipment, conduct production testing, install test injection equipment, conduct injection testing, install permanent pump and motor, conduct rehabilitation at SMTIW No. 1), staff recommends that the current 5% contingency be increased to 15%. This is a budget contingency increase of $100,851, resulting in a total budget contingency of $151,276.

RECOMMENDATION: District staff recommends that the General Manager be authorized to expend budgeted contingency funds as needed up to a total of $151,276, consisting of 5% existing authorized amount ($50,425) plus a recommended 10% increase ($100,851). The Administrative Committee reviewed this item on February 12, 2007 and voted 3 to 0 to recommend approval of this additional contingency authorization.

BACKGROUND: A Call For Bids for the drilling and construction of the SMTIW No. 2 was distributed to prospective drilling contractors on October 13, 2006, and a Public Notice Inviting Sealed Bids was published in The Herald on October 19, 20, and 21, 2006. At the bid opening on November 3, 2006, responses were received from three firms, ranging from $1,008,510 to $1,427,000. On November 20, 2006, the Board authorized a contract agreement with the low bidder, Zim Industries, Inc., which is the same firm that was contracted to construct the SMTIW No. 1 in 2001 and 2002. Mobilization began on December 4, 2006, and well installation was completed in late January 2007. Actual drilling and well completion depths were 70 feet deeper than anticipated in the bid document. Accordingly, the existing authorized budget contingency was exhausted due to the extra required drilling and well completion depths. Currently, the new well is undergoing rigorous well development, which is requiring extra time and expenditure to complete, including the need to lower the development pump in the well for more effective and extended pumping development. This work will require a change order of $6,000, which is not available in the currently authorized budget contingency. Given the need for this additional work plus other potential additional unforeseen tasks that could occur while other work is being accomplished under this contract, staff is now recommending that the existing 5% authorized contingency be increased to 15% to cover for this and other possible contingency needs.

IMPACT TO STAFF/RESOURCES: Budgeted amounts to complete the SMTIW No. 2 drilling and construction and SMTIW No. 1 rehabilitation are included in the District’s FY 2006-2007 budget (Goal: Augment Water Supply, Water Supply Projects, Objective 1-2-1 A. 1. Second ASR Well, page 15 of June 22, 2006 adopted budget). This budget includes a contingency for this component of the Phase 1 ASR Project work of $255,000. The revised recommended contingency under this contract of 15% ($151,276) is within the budgeted contingency amount.

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